A New Era of Taxpayer Slavery?

In the midst of highly unpopular bailouts of Wall Street, many justifications have been given about why Washington feels the need to act. Some claim that capitalism and the free market are to blame, but we have not had capitalism. If you compare our financial capital to our aggregate debt, this would be obvious. In the same way, we have not had a truly free market. The monetary manipulations of the Federal Reserve, a complex tax code, the many “oversight” agencies and their mountains of regulations show that we are far removed from a free market economy.

Another unsatisfying argument is that certain entities have to be bailed out because of their economic importance. Supposedly, some entities can be so big, so important, that no matter what they do, citizens must perpetually sustain them.

Even limited government has a basic duty to defend against force and fraud. Some argue that force is somehow permissible just because the entity engaging in it is “economically significant.” But one could use this reasoning to prop up slavery. It could be deemed unfortunate but economically beneficial, and indeed these arguments have been used historically to deprive people of their liberty. But slavery should never be tolerated regardless of any economic benefit, just as systemic fraud should not be tolerated.

Some banks on Wall Street should fail. Fannie and Freddie should fail. They are perpetrating fraud against the people. Yet, government insists on rewarding behavior which should instead be investigated, prosecuted, and punished.

There has been much evidence of fraud at Fannie and Freddie, but when one man, Franklin Raines, defrauded the organization out of millions of dollars through illegal accounting tricks, and ends up agreeing to pay back just a fraction, one could argue that it was well worth it to him. Fannie went on to only get more deeply involved in subprime mortgages after this investigation.

Several organizations are suffering right now precisely because the free market is trying to work and punish mismanagement, if only the government would get out of the way and let it. Perhaps banks are not lending to each other because they know that complicated accounting standards, created in part to defend against confiscatory tax policy, enables false fiscal pictures to be presented, which erodes trust.

But this is not a time for the government to step in with more burdensome and complicated regulations, or more foolish liquidity injections. This is a time for some banks to fail, and remaining banks to deal honestly and transparently once again. More regulations will only result in more lies.

Just as economies that turned away from slave labor had a transition period, our economy would transition as well, but in the end, if we turned to honest, sound money and a truly free market, we would end up with a more just society, founded on truthfulness and decency, not subject to the violence of force or the whims of fraudulent institutions.

Unfortunately, it seems we are headed into a new era of slavery, however, where all taxpayers will be forced to render to the Fed and big banking interests the bulk of the fruits of their labor, possibly through higher taxes but definitely through the eroding force of inflation.

We have to remain vigilant. I think our best bet is to keep on top of the issues, inform people of alternatives to the poorly managed corporations and big banks that take part in the government funded infringement upon the economy and our liberties.

Paxalot: That is what I am doing now. We recently moved from the city to the country. Tiny mobile home with 3 little kids, but no mortgage. I’ll be planting a “liberty garden” soon. Our assets are going into infrastructure, which is a hedge against both inflation and deflation (whichever happens). Whether the Greatest Depression has begun, or whether Bush & Co. manage to stave it off for another year or two, it’s coming and it’s going to be bad. But at least we will have fresh veggies until FEMA confiscates them.

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Peter B

I’m reminded of Gene Hackman’s quote as Lex Luthor: “Son, stocks may rise and fall, utilities and transportation systems may collapse. People are no damn good, but they will always need land and they’ll pay through the nose to get it!”

Of course the value will change, and under our current system, we really don’t *own* the land (seriously, if you can’t pay your taxes, who comes and takes the land away from you?)… but it’s as safe a bet as any other.

Jesper, I’m curious as to your thoughts on “something fishy” going on with gold. It doesn’t seem like a wise investment, considering its completely arbitrary value, but did you have anything particular in mind when you said that?

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jesper k

Good article Dr. Paul.

Paxalot: Commodities like corn, sugar, coffee (Columbia just reported there might be shortage next year) etc are safe bets, because they will never ever hit 0 value.Gold is a bit trickier it seems, at central banks have so much of it and there is something fishy going on there. But gold will keep a lot of value and most likely go up a lot, the more the dollar fail.
Oil should be a safe bet too, but as you have probably noted, fishy things going on there too.

There seems to be a panic going on, or at least there has been. People have sold everything in this panic, hence the drops in prices I think.

Property, as long as it’s not financed with loans it too is not goint to ever go to 0. But as housing collapses, property will go down too.

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Paxalot

Does this mean tangible assets like property, gold and agriculture will rise in value against the diminishing dollar? If so, should we being converting our cash into assets now?

11:52 am: "Yes I know brother that he ran as a republican, it is sad enought that he not can run as an LIBERTARIAN. I truly hope he’s gonna run again. We can only support him..." - knowitall

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